Category: Korea-Business

Very rarely have I seen President Moon be criticized in the media, but it looks like he is finally facing some heat for his domestic job policies:

South Korea has been trapped in a paradox of employment.

Domestically, the more effort the government makes, the more difficult it is for young people to find decent jobs.

In other words, President Moon Jae-in’s job policies are limiting the creation of new, quality jobs in the private sector.

Last year, Moon implemented a supplementary budget of 11.2 trillion won ($10.5 billion) to create jobs and formulated another extra budget plan of 3.9 trillion won early this month. However, the job market situation has taken a turn for the worse.

The jobless rate reached 4.5 percent in March, the highest level in 17 years. The number of jobs created came to 112,000 from the same month a year ago, sharply down from January’s 334,000.

Internationally, Korea is isolated in its job market recovery.

Many big economies, including the U.S. and Japan, are showing handsome figures in employment, while Korea’s labor market has stayed in the doldrums.

The jobless rate for the U.S. stood at 4.1 percent in March, the lowest level in 17 years. Japan’s unemployment rate was at 2.5 percent in the same month, similar to 2.4 percent in February, the lowest in nearly 25 years.

The employment fiasco for Asia’s fourth-largest economy is the outcome of a toxic mixture of three forces ― Moon’s contradictory policies, market uncertainties and technology.

First, a surge in the unemployment rate is paradoxically associated with Moon’s job policies.

The Moon administration has been trying to take the initiative in job creation rather than encouraging the private sector to hire new employees.

Moon has focused on creating jobs in the public sector by hiring more civil servants and turning irregular workers into regular ones.  [Korea Times]

You can read more at the link, but I never did see how adding a bunch of government jobs without a justification for them would help the economy?

This seems to be the wave of the future, cashless stores:

Starbucks Coffee Korea, the local unit of the U.S. coffee giant, said Thursday it will begin a test run of cashless stores at three outlets next month amid rising use of credit card and mobile payment systems.

The stores at the country’s major office districts — Gangnam and Guro in Seoul, and Pangyo, just south of the capital — have been tapped to start testing the new system April 23, according to the company.

When launched, it will mark the second trial for the global coffee giant, following its first cashless store under test run in Seattle, the United States, it said.

Paying with cash has been constantly declining at Starbucks stores in South Korea, from 31 percent of the total in 2010 to 15 percent in 2013 and 7 percent last year, the company said.  [Korea Times]

You can read more at the link.

President Trump is taking credit for GM shutting down one of their factories in Gunsan and relocating to Detroit:

U.S. President Donald Trump on Tuesday hailed General Motors Co.’s decision to shut down a plant in South Korea, saying the carmaker will now “move back” to Detroit.

GM announced the same day that it will close one of its four car assembly plants in South Korea by the end of May due to lower demand for its vehicles. The move came as part of the Detroit-based automaker’s broad restructuring program across the world.

“GM Korea company announced today that it will cease production and close its Gunsan plant in May of 2018, and they’re going to move back to Detroit,” Trump said at a trade-related meeting at the White House.

The facility in Gunsan, 270 kilometers south of Seoul, was underutilized and running at 20 percent of its capacity for the past three years.

“You don’t hear these things, except for the fact that Trump became president,” Trump said. “Believe me, you wouldn’t be hearing that. So they’re moving back from Korea to Detroit. They’re moving.”  [Korea Times]

Apparently GM is saying they are closing the plant due to higher labor costs in South Korea.  GM is trying to get the union to renegotiate its labor contract to keep its other three plants in the country open.

Another one of these long term anti-US issues has come back up again:

Lawyers for a Democratic Society (LDS) sent a letter to the International Center for Settlement of Investment Disputes (ICSID), Tuesday, demanding a speedy settlement of the dispute between the Korean government and the U.S. buyout fund Lone Star Funds over the sale of the Korea Exchange Bank (KEB).

“The process of the legal battle worth 5 trillion won ($4.68 billion) has been shrouded in secrecy since 2012, so we requested rapid processing under the principle of transparency,” Song Ki-ho, the chairman of the international trade committee at the LDS, told the Korea Times.

The nongovernmental organization has a special consultative status with the United Nations Economic and Social Council.

In 2012, Lone Star filed a request with the ICSID, claiming the Korean government should compensate it for the “belated” approval of its sale of its KEB stake to Hana Financial and return the taxes it paid during the delay.

The global private equity firm acquired a 51.02 percent stake in KEB from a German bank in 2003, but exited Korea in 2012 after selling the stake and gaining about 4.9 trillion won in profit.  (….)

Observers said the ruling will come around March this year and note the Korean government may have to pay Lone Star hundreds of billions of won in compensation. Some point out the government may claim a part of the money from Jun Kwang-woo, a former chairman of the Financial Services Commission.  [Korea Times]

You can read more at the link, but basically the crime Lone Star made was that it made too much money in Korea and then tried to take its profits outside the country.  Their sale of the Korea Exchange Bank led to large protests which caused the government to try and stop the sale any way it can.

I don’t see what is so surprising about President Trump’s comment, it is no secret that he has been pushing to bring manufacturing jobs back to the United States:

While circling the sky near the inter-Korean border last week, U.S. President Donald Trump posed a question that later took the leader of South Korea’s ruling party by surprise.

According to Choo Mi-ae of the Democratic Party, Trump was on his Marine One helicopter to the heavily fortified demilitarized zone when he turned to White House chief economic director Gary Cohn and said: “I just saw something amazing. There are so many factories. Can’t they be built in the U.S.?”

The trip to the DMZ was later canceled due to fog and Trump had to turn back to Seoul to continue his two-day state visit. The trip was watched closely because Trump had threatened to use military options against North Korea and engaged in a war of words with the regime over its nuclear and missile programs.

“I think President Trump understood, while he was in the air for 30 minutes, that 25 million people were living in the area below him and that they would be wiped out in the event of war,” Choo said in a meeting with reporters in New York. “But I was so surprised when Director Cohn told me this story. Wasn’t (Trump) essentially saying we should build our auto parts factories in the U.S., too?”  [Yonhap]

You can read more at the link.

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Paris Baguette is about to get hit with a huge fine if it doesn’t directly hire 5,400 bakers in 25 days:

Paris Baguette is facing its biggest crisis in its history as it has been ordered by the government to hire 5,400 patissiers directly, placing a heavier financial burden on Korea’s largest bakery franchise.

Currently, most patissiers working at Paris Baguette franchisees are dispatched by the firm’s 11 partner firms, but are trained and supervised by the bakery.

The Ministry of Labor and Employment is calling the practice illegal because patissiers are not one of 32 occupations allowed to be outsourced under the law, ordering the bakery to directly hire them.

The ministry said Paris Baguette opts to have its small business partners hire workers and send them to work for it, which costs less than directly hiring them as regular employees.

However, Paris Baguette said it shouldn’t be obliged to hire patissiers, adding they do not work for the franchise headquarters. The bakery said patissiers work at franchisees, stressing it trains and supervises them on behalf of franchised store owners.

The company said it is considering filing an administrative litigation against labor ministry’s order to directly hire bakers dispatched by its partner firms.

The ministry concluded Thursday that Paris Baguette has directly supervised bakers dispatched by its partner companies, violating the legal dispatch code of the labor law. The ministry ordered it to directly hire all of the 5,378 bakers who are working at its 3,396 franchise stores.

If Paris Baguette does not comply with the order within 25 days after receiving the official document, it would face a fine of up to 53 billion won ($46.5 million).  [Korea Times via reader link]

You can read more at the link, but I don’t see any evidence in the article of the bakers being mistreated by the franchisees that hired them.  I think there is probably more to this story than what is published in the article.

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From my perspective the McDonald’s in South Korea always seem cleaner and more professionally run than most I see back in the US:

McDonald’s Korea has filed a court injunction against the disclosure of the results of the Korea Consumer Agency’s sanitary inspection, the U.S.-based fast food chain said Wednesday.

The agency recently investigated 38 hamburgers marketed by six fast food franchises and five convenience store chains, following lawsuits over alleged undercooked McDonald’s patties.

Five Korean consumers have sued the company so far, claiming their children suffered hemolytic-uremic syndrome (HUS), or the so-called “hamburger disease,” after eating McDonald’s hamburgers.

Although none of the products contained the controversial E. coli bacteria, which is known to cause HUS, the agency found that one McDonald’s hamburger contained staphylococcus aureus above the standard level. The bacterium is a common cause of food poisoning.

The agency initially planned to unveil its findings Tuesday, but scrapped the plan following McDonald’s Korea’s complaint that was applied a day earlier.

McDonald’s Korea criticized the agency for neglecting the required procedures.

“Food hygiene tests should be conducted by trained inspectors who should not hide their identity. A sample should be contained in an airtight sterilization container as well,” a spokeswoman of McDonald’s Korea said.

“However, an inspector, who visited our Gangnam store, pretended to be an ordinary customer. He also carried the sample in a paper bag, not immediately putting it into an airtight sterilization container.”  [Korea Times]

You can read the rest at the link, but I can understand McDonald’s beef (pun intended) if the inspectors are not conducting inspections by agreed upon standards.

Considering that President Moon has plans to increase taxes on the wealthy and businesses to create a welfare state, President Moon better serve some pretty good beer to get these ROK business leaders on board:

President Moon Jae-in is set to hold his first dialogue with top business leaders here this week over beer to help break the ice and possibly allow more frank discussions, an official from the presidential office, Cheong Wa Dae, said Tuesday.

The talks will be held Thursday and Friday, each day involving part of the top executives from the 14 largest business conglomerates, according to Cheong Wa Dae spokesman Park Soo-hyun.  [Yonhap]

You can read more at the link.